MetroHealth wants its owner, Cuyahoga County, to allow it to enter a letter or letters of credit agreement as it finances an $855 million campus transformation project.

DALLAS -- Cleveland-based MetroHealth wants to persuade Cuyahoga County to allow it to substitute a liquidity agreement for a debt service reserve fund on forthcoming bond deals.

The council last week voted to move legislation to authorize an agreement to allow the county-owned health and hospital system to obtain and/or pledge one or more letters of credit from a bank or banks to support the system's campus transformation process.

The letter or letters of credit would substitute for an $82 million debt reserve fund that MetroHealth would have been required to establish when selling bonds for the project.

The deal would save MetroHealth approximately $160 million over the course of the 40-year debt it plans to issue to finance a campus transformation project, health system officials say.

The agreement would allow the county to decrease the annual subsidy to the hospital if the county needs to draw down on the letter of credit because MetroHealth couldn't make a debt service payment.

County Council president Dan Brady said that MetroHealth is scheduled to make a presentation to the full county council in early April to better explain just how the county contribution would work.

"This is a project that has almost entirely been self-financed by MetroHealth," said Brady at last week's council meeting. "The county has been able to help but it would be important for the council to understand what is we are helping with."

MetroHealth announced the transformation of its 52-acre campus at the end of last year and an aggressive four-month timeline to secure financing.

"We are certainly very pleased county council is demonstrating their commitment to MetroHealth and the transformation project," Metro CEO Akram Boutros said in a statement. "This is not only an investment in much-needed health care facilities but also in our West 25th Street neighborhood."

The health system announced that by the end of the first quarter of 2017, it plans to borrow up to $1.25 billion to finance the estimated $855 million transformation of the 52-acre campus between now and 2023 and for refunding some of the system outstanding debt.

The health system has $93 million of outstanding bonds.

Last month S&P Global Ratings affirmed the A-minus rating of the bonds but put placed the ratings on Credit Watch status. The bonds are rated A3 by Moody's Investors Service with a stable outlook. Fitch Ratings rates the health system A-minus, with stable outlook.

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